Customer Behavior in Service Encounters

A Framework for Developing Effective Service Marketing Strategies

Understanding Customer Needs, Decision Making, and Behavior in Service Encounters
Chapter 2

Building the Service Model

Part II: Chapters 3-7

Managing the Customer Interface

Part III: Chapters 8-11

Implementing Profitable Service Strategies

Part IV: Chapters 12-15

A Framework for Developing Effective Service Marketing Strategies

Two Key Themes in Part I of the Services Marketing Strategy Framework:
Differences among Services Affect Customer Behavior
Three-Stage Model of Service Consumption

Prepurchase Stage: Search, evaluation of alternatives, decision

Service Encounter Stage: Role in high-contact vs. low-contact delivery

Post-Encounter Stage: Evaluation against expectations, future intentions

Differences among Services Affect Customer Behavior

in nature of service act (tangible/intangible) and who or what is Consumers are rarely involved in the manufacture of goods but often participate in service creation and delivery
Challenge for service marketers is to understand how customers interact with service operations Based on differences direct recipient of service (people/possessions), there are four categories of

services:

People processing Possession processing Mental stimulus processing Information processing

Four Categories Of Services

Who or What Is the Direct Recipient of the Service? Nature of the Service Act Tangible Actions People People processing (services directed at peoples bodies): Possessions Possession processing (services directed at physical possessions):

Intangible Actions

Barbers Health care

Refueling Disposal/recycling

Mental stimulus processing (services directed at peoples minds):

Information processing (services directed at intangible assets):

Education
Advertising/PR

Accounting Banking

Four Categories Of Services

People Processing Customers must:
Physically enter the service factory Co-operate actively with the service

operation

Managers should think about

process and output from customers perspective

To identify benefits created and

non-financial costs:

Time, mental, physical effort

Possession Processing
Possession Processing Customers are less physically involved compared to people processing services

Involvement is limited
Production and consumption are separable

Mental Stimulus Processing

Mental Stimulus Processing Ethical standards required when customers who depend on such services can potentially be manipulated by suppliers Physical presence of recipients not required Core content of services is information-based
Can be inventoried

Information Processing
Information Processing Information is the most intangible form of service output

But may be transformed into enduring forms of service output

Line between information processing and mental stimulus processing may be blurred.

The Purchase Process for Services

Prepurchase Stage

Service Encounter Stage

Post-Encounter Stage

Prepurchase Stage: Overview

Prepurchase Stage
Uncertainty about outcomes

Customers seek solutions to aroused needs Evaluating a service may be difficult

increases perceived risk

Service Encounter Stage
What risk reduction strategies can service suppliers develop? Understanding customers service expectations

Components of customer expectations

Making a service purchase decision

Post-Encounter Stage

Customers Seek Solutions to Aroused Needs

People buy goods and services to

meet specific needs/wants External sources may stimulate the awareness of a need Companies may seek opportunities by monitoring consumer attitudes and behavior

Figure 2.4 Prudential Financials advertising stimulates thinking about retirement needs
Courtesy of Masterfile Corporation

Evaluating a Service May Be Difficult

Search attributes help customers evaluate a product

before purchase
Style, color, texture, taste, sound

Experience attributes cannot be evaluated before

purchasemust experience product to know it

Vacations, sporting events, medical procedures

Credence attributes are product characteristics that

customers find impossible to evaluate confidently even after purchase and consumption
Quality of repair and maintenance work

How Product Attributes Affect Ease of Evaluation

Most Goods Most Services

Easy to evaluate
Clothing Chair Motor vehicle Foods Restaurant meals Lawn fertilizer Haircut Entertainment Education Legal services

Difficult to evaluate*
Computer repair

Complex surgery

High in search attributes

High in experience High in credence attributes attributes

Source: Adapted from Zeithaml

*NOTE: Difficulty of evaluation tends to decrease with broad exposure

to a service category and frequency of use of a specific supplier

Perceived Risks in Purchasing and Using Service

Functionalunsatisfactory performance outcomes

Eg: Acceptance of credit card

Financialmonetary loss, unexpected extra costs

Eg: Incur unanticipated expenses/ losses

Temporalwasted time, delays leading to problems

Eg: Waiting time in line/slow service

Physicalpersonal injury, damage to possessions Psychologicalfears and negative emotions Socialhow others may think and react

Eg: Approval /Disapproval by friends-relatives

Sensoryunwanted impact on any of five senses

How Might Consumers Handle Perceived Risk?

Seeking information from respected personal sources Relying on a firm that has a good reputation Looking for guarantees and warranties Visiting service facilities or trying aspects of service before purchasing Asking knowledgeable employees about competing services Examining tangible cues or other physical evidence Using the Internet to compare service offerings and search for independent reviews and ratings

Strategic Responses to Managing Customer Perceptions of Risk

Offer performance warranties, guarantees to protect

against fears of monetary loss For products where customers worry about performance, sensory risks:
Offer previews, free trials (provides experience) Advertising (helps to visualize)

For products where customers perceive physical or

psychological risks:

Institute visible safety procedures Deliver automated messages about anticipated problems Websites offering FAQs and more detailed background Train staff members to be respectful and empathetic

AOL Offers Free Trial Software to Attract Prospective Customers

Understanding Customers Service Expectations

Customers evaluate service quality by comparing what they

expect against what they perceive

Situational and personal factors also considered

Expectations of good service vary from one business to

another, and among differently positioned service providers in the same industry
Expectations change over time Example: Service Perspectives 2.1 Parents wish to participate in decisions relating to their childrens medical treatment for heart problems Media coverage, education, the Internet has made this possible

Factors Influencing Customer Expectations of Service

Personal Needs Desired Service Beliefs about What Is Possible Explicit & Implicit Service Promises Word-of-Mouth Past Experience

ZONE OF TOLERANCE

Perceived Service Alterations Adequate Service Situational Factors Predicted Service

Source: Adapted from Valarie A. Zeithaml, Leonard A. Berry, and A. Parasuraman, The Nature and Determinants of Customer Expectations of Service, Journal of the Academy of Marketing Science 21, no. 1 (1993): pp 112.

Components of Customer Expectations

Desired Service Level: Wished-for level of service quality that customer believes can and should be delivered Adequate Service Level: Minimum acceptable level of service Predicted Service Level: Service level that customer believes firm will actually deliver Zone of Tolerance: Range within which customers are willing to accept variations in service delivery

Service Encounter Stage: Overview

Prepurchase Stage
Service marketing systems: highcontact and low-contact

Service encounters range from highto low-contact Understanding the servuction system

Service Encounter Stage

Role and script theories

Theater as a metaphor for service delivery: An integrative perspective Implications for customer participation in service creation and delivery

Post-Encounter Stage

Service Encounters Range from High-Contact to Low-Contact

)

Figure 2.9 Levels of Customer Contact with Service Organizations

Distinctions between High-Contact and Low-Contact Services

High-Contact Services Customers visit service facility and remain throughout service delivery Active contact between customers and service personnel Includes most people-processing services Low-Contact Services Little or no physical contact with service personnel Contact usually at arms length through electronic or physical distribution channels New technologies (e.g. the Web) help reduce contact levels Medium-Contact Services Lie in between These Two

The Servuction System: Service Production and Delivery

Service Operations (front stage and backstage) Where inputs are processed and service elements created Includes facilities, equipment, and personnel Service Delivery (front stage) Where final assembly of service elements takes place and service is delivered to customers Includes customer interactions with operations and other customers Service Marketing (front stage) Includes service delivery (as above) and all other contacts between service firm and customers

SERVICE MARKETING SYSTEM

Service Marketing System for a High-Contact Service

Service Delivery System Service Operations System
Interior & Exterior Facilities Other Customers

Other Contact Points

Advertising Sales Calls Market Research Surveys Billing/Statements

Technical Core

Equipment

The Customer

Misc. Mail, Phone Calls, E-mails, Faxes, etc. Website

Service People

Random Exposure to Facilities/Vehicles Other Customers

Backstage (invisible)

Front Stage (visible)

Chance Encounters with Service Personnel

Word of Mouth

Service Marketing System for a Low-Contact Service

SERVICE MARKETING SYSTEM

Service Operations System

Service Delivery System Mail Other Contact Points Advertising

Technical Core

Self Service Equipment

Phone, Fax, Website, etc.

The Customer

Market Research Surveys Billing/Statements Random Exposure to Facilities/Vehicles Word of Mouth

Backstage (invisible)

Front Stage (visible)

Theater as a Metaphor for Service Delivery

All the worlds a stage and all the men and women merely players. They have their exits and their entrances and each man in his time plays many parts

William Shakespeare As You Like It

Theatrical Metaphor: An Integrative Perspective

Service dramas unfold on a stagesettings may change

as performance unfolds

Many service dramas are tightly scripted, others

improvised

Front-stage personnel are like members of a cast Like actors, employees have roles, may wear special Support comes from a backstage production team Customers are the audiencedepending on type of

costumes, speak required lines, behave in specific ways

performance, may be passive or active participants

Implications of Customer Participation in Service Delivery

Greater need for

information/training to help customers to perform well, get desired results Customers should be given a realistic service preview in advance of service delivery, so they have a clear picture of their expected role

Figure 2.13: Tourists Appreciate Easy-toUnderstand Instructions When Traveling

Post-Encounter Stage: Overview

Prepurchase Stage

Service Encounter Stage

Evaluation of service performance Future intentions

Post-Encounter Stage

Customer Satisfaction Is Central to the Marketing Concept

Satisfaction defined as attitude-like judgment following a service

purchase or series of service interactions Customers have expectations prior to consumption, observe service performance, compare it to expectations Satisfaction judgments are based on this comparison
Positive disconfirmation if better than expected
Confirmation if same as expected Negative disconfirmation if worse than expected

Satisfaction reflects perceived service quality, price/quality tradeoffs,

personal and situational factors Research shows links between customer satisfaction and a firms financial performance

Customer Delight: Going Beyond Satisfaction

Research shows that delight is a function of three

components:

Unexpectedly high levels of performance Arousal (e.g., surprise, excitement) Positive affect (e.g., pleasure, joy, or happiness)

Is it possible for customers to be delighted by very

mundane services?

Strategic links exist between customer satisfaction

and corporate performance.

Getting feedback during service delivery help to

boost customer loyalty

Progressive Insurance seeks to delight customers

through exceptional customer service